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Criteria I Governments I U.S. Public Finance: U.S. Local Governments General Obligation Ratings:Methodology And Assumptions Table 2 Overriding Summary Of • paragraphs 25-35) (cont.) Available Fund Balance<$500,000 Final rating one notch lower than that suggested by table 1 Cap Overrides(rating capped) Liquidity score equals'4' Final rating capped at'BBB+' Liquidity score equals'5' Final rating capped at'BB+' Management score equals'4' Final rating capped at the lower of'A'and one notch lower than that suggested by table 1 Management score equals'5' Final rating capped at the lower of'BBB'and two notches lower than that suggested by table 1 Management score equals'5'due to a lack of willingness to support unconditional debt Final GO rating on debt not in default capped at'B' obligations Available Fund Balance<-10%of general fund expenditures for the most recently reported Final rating capped at'A+' year or budget flexibility score equals'5' Available Fund Balance<-5%of general fund expenditures for the two most recently Final rating capped at'A-' reported years Available Fund Balance<-5%of general fund expenditures for the three most recently Final rating capped at'BBB' reported years Budget performance:For local governments that exhibit characteristics of structural Final rating capped at`BBB+' imbalance expected to continue and the government does not have a credible plan to restore balance *EBI--Effective Buying Income(see glossary) Factors That Notch From The Indicative Rating a) Rating adjustments for certain economic measures 28. When variables measured as part of the overall economic score take on extreme values, adjustments from the indicative rating occur.When projected per capita Effective Buying Income (EBI) as a percentage of the U.S. projected per capita EBI exceeds 225%(50%higher than the top income threshold in table 8),the final rating is raised by one notch to account for the extreme income levels in the tax base.When projected per capita EBI exceeds 300%of the U.S. level,the final rating is raised by two notches. No similar adjustment applies to Total Market Value(TMV)per capita because high scores often result from concentrated tax bases.When TMV per capita is less than$30,000, however,the final rating is lowered by one notch to reflect the limited tax base supporting debt. b) Sustained large positive fund balances 29. An abnormally large sustained Available Fund Balance signifies heightened flexibility if projections suggest that it will endure.Accordingly,the maintenance of an Available General Fund Balance exceeding 75%of general fund expenditures for the most recently reported year,the current and next year, and that is projected to continue at that level raises the final rating by one notch. c) Low nominal fund balances 30. The Available Fund Balance as a percentage of expenditures measure,used in the budgetary flexibility score, can mask vulnerability when absolute nominal levels of reserves are low.Accordingly,when the Available General Fund Balance for the most recently reported year is below$500,000(but above a level that causes a rating cap to occur--see paragraph 34),the final rating is lowered by one notch to reflect this vulnerability. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 12,2013 12 1190266 1300881696